Geo Experiences the Biggest Decline in the Shares

The 2nd biggest homebuilder of Mexico by revenue, Corp. GEO SAB experienced its biggest plunge in the last 14 years as the company announced that it would miss an interest payment and also that the cash tumbled by 84% in the first quarter of the current year. The shares of the company experienced a decline of 22% and each share is currently priced at 4.68 Mexican Pesos. This marks the biggest drop for the company’s shares since September, 1998 on closing basis. The dollar denominated bonds of the company that are due in 2022 declined by 9.09 cents to a record low figure of 45.13 cents on the USD.

Geo made a filing on today and the company stated that it will be missing an interest payment on the bonds which are denominated in Mexican Pesos. Late yesterday, an earnings report was released by the company which showed that the homebuilder based in the Mexico City experienced drop of 84% in the cash and the cash equivalents. Those are at 371.4 million Mexican Pesos as of the end of March, from the end of last year. During this quarter, the company had a negative free cash flow to equity of 1.7 billion Mexican Pesos.

According to the Analyst of Grupo Financiero Banorte SAB, Carlos Hermosillo, the missed bond payment definitely makes sense if this whole process is taken into consideration. However, it was definitely not an expected outcome. Hermosillo added that all the investors are now waiting to see what will happen with the restructuring process of the company. Incidentally, on 12th April, the representatives of Geo announced that the company has hired Fians Capital for advising them on the possibility of a restructuring and how the same will be conducted. The company had a conference call with the analysts and the investors on the last quarter; however, it didn’t allow any questions during the same.

In 2013, the finances of Geo have deteriorated. The fate has been pretty similar for the other prominent publicly traded homebuilders of the country as well. The Mexican Government delayed the payment of the housing subsidies and shifted the policy for promoting capital intensive apartment construction in the urban areas over the single family homes in the commuter towns. In 2013, the Mexico Habita Index measuring the 6 publicly traded builders has declined by 57%.